Lugkana Worasinchai issues involved particularly in business environments such as Thailand with a strong and influential national culture. As a result, the current study expands existing studies on exchange rate risk and currency hedging strategy by adopting a case study approach using both document review method and semi-structured interview method for data collection, and thematic analysis for analyzing the collected data with the aim of exploring factors that affect currency hedging strategies for TCIFX. Below is a description of the adopted methodology: Selection of the case study organizations: To select appropriate firms for data collection the financial statements in the annual reports of non-financial SET-50 companies (the top 50 companies listed in the Thai stock market) were reviewed. The justification for using the SET-50 firms for the study is that these firms usually represent best practices with some kind of standard hedging strategies already in place. Furthermore, the exchange rate practice of these firms set norm for the remaining Thai firms who are involved in foreign exchange transactions. From the above list those firms with extensive involvement in exchange rate transactions were selected. This was determined by examining exchange rate gain/loss item of the firm’s financial statement. Identification of the currency hedging strategy of the case study organizations: To this end the financial statement of the selected firms were reviewed in order to determine the firm’s hedging strategy. Normally the firms report tools for financial hedging strategy; however the absence of a specified financial strategy tool in financial statement would imply that the firm must be using some sort of internal hedging strategy. The latter issue will be clarified during the interview with selected firms. Inviting selected firms for interview: A separate invitation letter was sent to each of the selected firms with an indication of the possibility that they may be involved in the study for a longer term. Respondents were given the opportunity to choose one of the following options: I am willing to participate, and I offer my long-term commitment to the study. I am willing to participate, and I offer my short-term commitment to the study I cannot accept the invitation. All respondents from the first category will be selected for the study. If the number is less than 10, the remaining ones will be selected from the second category. No selection will be made from the third category. A total of three qualified firms were selected for the current study. Interviews were conducted in the companies’ sites and lasted 60 – 90 minutes each.
5. Reporting and analysis of the results One representative was invited from each of the three case study organizations for the interview. The highlights of the interviewee responses and analysis of the results are presented below for each company separately. Company A: The company has high level foreign transactions in borrowing money from abroad. This means that the company exposure to foreign currency high. On the other hand, . the interviewee mentioned that the company does not encourage speculation of exchange rate and all major policies on this matter are ultimately made by the board of directors and are implemented hierarchically through the CFO’s initiatives. Such response is also consistent with the observation that the company fully hedges the risk. We may therefore conclude that the management’s attitude towards risk has been a ‘risk avoider’. This answers the first research question of the study. Furthermore, the planning horizon for currency hedging strategies adopted by the company has been both short- term and long- term. The reason for arriving at such conclusion is that generally speaking, companies are exposed to three types of risks including transaction, translation, and operating risks. Transaction and translating exposure are short term risks, and operating exposure is long term risk. Company A hedges against the transaction exposure only. This suggests that it adopts a short-term planning horizon in its currency hedging strategy. Furthermore, it was noticed that the company dynamically responds to such short-term risks by using a variety of hedging strategies and associated financial tools that are specific to short term risk such as forward contract and options (REF). This in turn provides an answer to the second research question.
345